NEW YORK-A meager supply pipeline of condominiums is likely to create a “physical cliff” for developers in 2013, according to Adrienne Albert, founder and CEO of the Marketing Directors. The company has issued a “New Product Supply” report to clients that tracks and analyzes new development supply and absorption numbers.

According to the report, there is only a six-month supply of new condominium homes scheduled to meet the market in 2013. At 2012 absorption rates, there is not enough inventory to satisfy market demand, Albert says, calling the problem “the physical cliff.”

“We've analyzed all of the projects on the books—and that includes those that have started or have been sold—so we have a sense of what the pipeline would be,” she tells GlobeSt.com. “It's frighteningly low.”

Just how low could inventory go?

“There are only about 1,200 projects that could come to life,” says Albert, “whereas the others [being considered] are so far away from completion that's there's no number we can ascribe to them. No one has designed homes for those projects or sought permits, or anything along those lines.”

In part, the problem stems from the lack of lending options, Albert continues in an announcement of the report. “The days of 'if you build it they will come' have ended, and now institutions are concerned about lending for condos. Since there's no continuing source of income on condos, financial institutions prefer to lend on rentals. Until that changes, we won't see a lot of new product for the next two or three years.”

Worse, this trend will prompt a price increase, Albert asserts. “As existing inventory is absorbed, prices will increase,” she said. “We are advising our clients on ways to meet this market to achieve their pricing and absorption goals.”

The Market Directors report indicates that some pockets of the city face a greater risk of falling off this cliff than others. The Upper West Side, with just 329 homes in inventory, 53 new home listings and an absorption rate of 33.4%, is likely to run out of supply in just five months, according to the report. Meanwhile Midtown East, which has a larger inventory at 473 homes, with 51 new listings, and a lower absorption rate of 19%, has a nine-month supply of new homes for sale.

“We think our clients need to be aware of this looming physical cliff as they plan developments that will bring new homes to the New York City market,” Albert says in the announcement. “Demand will definitely outpace supply, and this will have a real impact on how developers approach the market, from site acquisition all the way through to pricing and sales.”

To read a one-page summary of the Marketing Directors' New Product Supply report, please click here.

Instant Insights /

New Report Paints Dire Picture for Condominium Developers

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